Obligation to Declare Real Estate Assets
The legislator has established an obligation to declare real estate assets to the Administration of Patrimonial Documentation. This stems from Article 445, §5 of the Income Tax Code of 1992, which requires any change affecting a property to be declared to determine or update its cadastral income.
Importance of the Cadastral Income
What matters to the administration is determining from when the property is habitable and occupied, and therefore from when it has a rental value and generates cadastral income, based on which property tax is calculated.
Deadlines and Events Subject to Declaration
The Royal Decree of 20 September 2023 imposes a mandatory spontaneous declaration within 30 days of any of the following events:
- the first occupation or rental—if it occurs before occupation—of a newly built property,
- the completion of works in the case of a transformed property (Article 473, paragraph 2, ITC); by “transformations,” the administration refers to structural modifications rather than finishing works such as painting or wallpapering,
- significant transformation of a property,
- changes to undeveloped land,
- the commissioning of new or additional equipment or machinery,
- the purchase or sale of property abroad.
Special Case of Donation
From a strict legal standpoint regarding the declaration obligation, the law does not specifically require a declaration before or after a donation. It requires the spontaneous declaration of one of the events listed above. However, if the declaration is not made before the deed of donation, the obligation will fall on the new owner, who will have to pay any fines—unless it is expressly stated in the deed that the donor assumes this obligation.
Penalties for Non-Declaration
Fines are set at the federal level in the event of non-declaration or late declaration: they amount to €1,000, €2,000, or €3,000 depending on the revised cadastral income, except in cases of force majeure, in which case no fine is applied.
Retroactive Tax Consequences
In addition to these fines, the relevant Regional Public Service may, where applicable, require the taxpayer to pay property taxes retroactively based on the new cadastral income, for up to 3 years—or even 5 years in cases of proven fraud by the administration. Under Article 20 of the Decree of 6 May 1999, the Region has 3 years to assess and collect property tax and issue a payment request.
Donation of a Property in an Irregular Situation
Regarding the deed of donation, nothing prevents an owner from donating a property that is not compliant with the declaration obligation, provided the future donee is informed prior to signing and accepts the property with full knowledge of its incomplete administrative status.
In such a case, the notary may proceed with the deed if it clearly states that the property is not compliant—cadastral income not determined or updated, absence of declaration 43B, possible urban planning irregularities—if it describes the property as it actually exists, and if it specifies that the donee will have to regularize the situation after the donation. This may notably result in back payments of property tax or the need to apply for a regularization permit.
Possible Refusal by the Notary
However, the notary may also refuse to execute the deed, particularly if urban planning information cannot be provided, if the cadastral situation prevents an accurate description of the property, or if there is a risk of serious planning irregularities.
Our advice:
In conclusion, the donation may proceed, but only if the notary agrees to execute the deed while mentioning all irregularities and if the donee accepts receiving a non-regularized property.
In practice, notaries generally prefer that the cadastral and urban planning situation be at least partially regularized before the deed, to avoid future complications.
We can assist you in regularizing your situation or declaring your real estate property.
